Equities and the Economy:

• Stocks close higher for 3rd consecutive day.
• Recovered almost all of last Wednesday’s losses.

U.S. equities closed higher yesterday for their 3rd straight session. The Dow finished up 90 points at 20,895, the S&P 500 rose 12 ending at 2,394 and the Nasdaq rose 50 points to 6,134. The last 3 days of gains have recovered almost all of last week’s sharp losses and swung the S&P back into positive territory for the month of May. A word of caution. The volume traded has been low lately. There’s a saying in trading, “volume confirms trend.” What we want to see is an up move on large volume. Moves on low volume show a lack of investor conviction. So the talk in conference rooms around the world is whether last week’s selloff was temporary or a signal of something more sinister. My take, again, my opinion, is it’s temporary. The fundamental backdrop hasn’t changed. The U.S. economy is on solid footing and other global economies are steady, even improving, such as Europe.

There were no fundamental economic reports of consequence yesterday. However, I did read an factoid that made me laugh. Apple’s market capitalization, $803 billion, is 38% larger than Chicago’s 2016 GDP, $581 million. By the way, so is Google’s.

European equities are not being impacted by the horrific suicide bombing in Manchester yesterday with the major indexes all trading in the green. Stocks there are being boosted by a report that euro zone manufacturing job growth month-on-month was the greatest in the survey’s 20 year history. U.S stocks are following with the Dow up 47 points.

The U.S. dollar is in the doldrums. It’s at a 6 ½ month low vs. a basket of foreign currencies. (I can hear you commodity bulls cheering!). The euro hit a 6 month high. The dollar’s weakness stems from fading expectations for fiscal stimulus from the Trump administration.

Oil

• Prices continue to rise.
• Close at highest level in a month.

As we get closer to Thursday’s OPEC meeting prices continue to grind higher. Yesterday WTI closed up 40¢ at $50.73 and Brent finished up 26¢ at $53.87. Yesterday’s settlements were the highest in a month. Overnight the OPEC cut agreement gained momentum on reports that Iraq is on board for the term of the cut agreement to be 9 months. That being said, no OPEC country has come forwarded stating they’ll cut deeper than they already are.

This morning, quite surprisingly, WTI is up 5 I say “surprisingly” because there was bearish news overnight. A report came out that the Trump administration wants to sell half of the 688 million barrels of oil in Strategic Petroleum Reserves from 2018 to 2027 in an effort to balance the budget. Now before anyone starts yelling and screaming this is just a proposal in the budget and Congress need to approve the budget.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices grind higher.
• Still in broad trading range.

The June Nymex contract closed 7.4¢ higher yesterday settling at $3.330. Once again though, there was virtually no change to the calendar strips. For the last 4 weeks natty has been chopping around in a broad range between $3.17 and $3.43. I do believe though that it’s going to be hard for natty to go below $3.17 for the summer. The long term weather forecasts are currently predicting temperatures to be above normal for at least June and July and that is going to have the bulls buying every dip.

Boy have renewable resources became a tour de force in the last couple of years. Take California. Last week 67.2% of the electricity supplied to the California grid was supplied by renewables, an all-time record. Now I know that because of the wet winter the west has an abundance of hydroelectric power, but a full 2/3rds of demand supplied by renewables?! That’s incredible!

This morning it’s chatter with natty down 1.6¢

Elsewhere

Something very sad happened last Sunday. That day, after an amazing 146 years, Ringling Brothers and Barnum & Bailey put on their last circus. No more 500 person crew, 100 animals and mile-long trains will be moving from town to town. Sunday was the last day lions, tigers trapeze artists, clowns, horses, high wire acts, motorcycles and daredevils will appear under the big top. Notice I didn’t say elephants. Elephants were removed from the performance last year after fierce and prolonged condemnation from animal rights groups and are at the circus’ sanctuary in Florida. Ticket sales were already struggling and the removal of the elephants was the coup de gras. The circus just couldn’t compete with video games and cellphones.